Market Failure and Non-Standard Contracting: How the Ghost of Perfect Competition Still Haunts Antitrust

Modern antitrust policy has a ‘love hate’ relationshipwith non-standard contracts that can overcome market failure.On the one hand, courts have abandoned various per se rulesthat once condemned such agreements outright, concluding thatmany non-standard contracts may produce benefits that are cognizableunder the antitrust laws.¹ The prospect of such benefits, itis said, compels courts to analyze these agreements under theRule of Reason, under which the tribunal determines whethera given restraint enhances or destroys competition.² At thesame time, courts, scholars, and the enforcement agencies haveembraced methods of rule of reason analysis that are undulyhostile to such agreements.³ In particular, courts and othersare too quick to view such agreements and the market outcomesthey produce as manifestations of market power. This articleseeks to explain why these agreements are still the object ofundue hostility.     

PPS waivers: implications for Medicare, Medicaid, and commercial insurers

This paper compares the Medicare prospective payment system (PPS) to four all-payer rate-setting systems that operated under HCFA waiver authority. The study examines the experience of Medicare, Medicaid, and commercial insurers under the two approaches. Data from several American Hospital Association surveys and from Medicaid 2082 report forms are analyzed. The paper concludes that the all-payer waiver programs have been as successful as PPS in controlling the rate of growth in Medicare costs. In addition, Medicaid programs are more successful in controlling their outlays in all-payer rate-setting environments than when they "go alone." Finally, there is no evidence to suggest that hospitals can increase charges in response to greater financial need under either PPS or the state waivers. Nevertheless, it appears that commercial insurers are better able to compete with Blue Cross plans in all-payer rate-setting states than elsewhere.